Over the course of the past week, Russia has garnered a great deal of attention with several noteworthy events taking place. These include the Kremlin drone attack, the screening of a documentary within the European Union that divulges Russian vessel involvement in the September explosion of underwater pipelines at Nord Stream, and a Reuters report indicating the suspension of India-Russia trade negotiations utilizing Rupees.
The noteworthy event of the week pertained to the decline observed in Brent and WTI commencing on May 1st. Furthermore, on May 2nd, a novel milestone was witnessed whereby WTI attained a level of 69 USD for the first time in several months.
The analysts put forth multiple explanations for the decline, encompassing:
1. The apprehension regarding insufficient demand in China.
According to Tina Teng, an analyst at CMC Markets Institute, the observed decline in oil price pressure is indicative of a less-than-promising economic situation in China and suggests that the prospects for oil consumption demand are not optimistic. In the last week, official statistical data revealed a sudden decline in China’s production activities in April, with the first contraction in the Purchasing Managers’ Index (PMI) since December 2022, which was directly linked to the production sector. This event holds significance for the economic outlook of the region.
2. The current study examines the sales of crude oil by Russia, a major player in the global petroleum market.
Despite the sanctions levied by the United States and Western nations, a report from Reuters cites that in April, Russia achieved its highest level of oil loading from Western ports since 2019, with an average daily load of 2.4 million barrels. This surplus in supply has resulted in an excess of oil that surpasses current market demand.
3. The foundational elements that shape the market.
As noted in prior reports, the decision by the Organization of the Petroleum Exporting Countries (OPEC) to reduce production levels by up to 1.6 million barrels was driven by the objective of mitigating deteriorations in oil prices, rather than a tactic intended to stimulate such prices. These measures were put in place as a response to mounting apprehensions within the industry regarding the potential impact of a 2023 economic recession and inflation-containment measures formulated by the Federal Reserve, which had triggered grave concerns about the likelihood of a substantial decline in oil prices. Nevertheless, the reduction of 1.6 million barrels in April 2023 served as a temporary solution to assuage apprehensions about a potential decline in the value of crude oil.
causing fuel prices to follow. Despite this, energy and mine sector shareholders can expect a brighter future with predictions of crude oil prices reaching USD 100 by companies like Goldman Sachs. SG Fuel HSFO CST180 fell to 427 USD on 3 May, while SG bitumen remained at 460 USD. S. Korea’s bitumen drops to 420 USD due to lower demand from China.
Bitumen price in Bahrain at 370 USD remained steady. However, on 1 May, western Indian ports saw a 17 USD drop while the eastern regions and certain states increased by 2.5 USD indicating high demand and price concerns. Iran’s weekly competition for vacuum bottom decreased to its lowest level in months, potentially dropping Iran bitumen prices on May 6th, though the extent of the fall is unclear.
The issue of declining prices, coupled with the positive outlook for the future, has engendered a complex situation. Recent reports indicate that market participants are advised to exercise prudence and caution when making commercial judgments.
This article was prepared by Shirin Yousefi, the Content specialist and market analyst of Infinity Galaxy